Aibu most people don't know rental income is taxable?

[sicknessmedi]

Most people don't realize that if you have a second home and rent it out, you have to declare rental income as income and pay tax?

Oh boo hoo my assets increased in value and now that I’ve sold them and benefitted from all that extra money I need to pay part of it in tax towards the services of the country I live in.

Absolutely this.

It's like driving at 70 in a 30 zone. "I didn't realise" is no excuse.

Seriously doubt this.

Inheritance tax is paid from the estate of the deceased…the beneficiary gets it tax free, why?

Inheritance tax is paid from the estate of the deceased…the beneficiary gets it tax free, why?

So you think an inheritance should be subject to inheritance tax and then subject to income tax on receipt by the beneficiary?

I wouldn’t be surprised if lots of people didn’t know. I once knew a guy who thought that once he’d bought his own house he didn’t have to pay any bills at all! No gas, no electricity, no council tax! He got well and relocating when they finally came after him! The mind boggles.

Wrong…. Inheritance is not taxable… tax is paid on the estate of the deceased, the beneficiary does not pay tax on the money they inherit.

Land lording is an investment activity and as such the profit comes from the appreciation of the asset.
If you also are able make a profit from the rent that's the cherry on top of the cake isn't it.
It's still passive income, you don't have to actually work for the money, you just need to own an asset which others aren't able to afford and then they are forced to give you their wages so that they can have a roof over their head

Well surely anyone who thinks about it would understand any income is taxable, be it from a job, investment or rent? You pay tax on savings above a threshold, you pay tax on pensions, who on earth thinks that rental income wouldn’t be? I’m a landlord, it’s my sole source of income, of course it’s taxed.

Usually. But if someone dies within 7 years of making a lifetime gift and IHT due on the gift, it’s the recipient that’s liable to pay the tax and not the Estate. It’s something a lot of people don’t realise.

(sorry to derail the thread 🤣)

We don't pay tax on savings, rather the interest earned on the savings is liable to tax over a certain threshold, although not if the savings are held in an ISA.

Yeah, because it’s just been paid by the estate.

I think a few accidental landlords who work on PAYE jobs may not realise.

Id say he was lying. Its income end of.

??? How?

Unless he said ‘oh shit really? I’d better look into it’ then I suspect you are right!

That's like saying wages/salaries aren't taxed, the tax is paid by the employer before the employee gets paid.

Yes so it’s taxed at source… but it’s still taxed. You stated you “never understood why inheritance isn’t taxed”!

The beneficiary doesn’t “get it tax-free” - as a simple example (thresholds and main residence rules etc put aside) if someone is bequeathed £1m in cash savings then they won’t receive the full £1m, because it will have had paid tax on it.

im still not convinced… the beneficiary has not paid tax…the deceased estate paid it.

But why should it be taxed twice?

Because it's simpler to manage.

One estate, one tax calculation, and an appointed person responsible for dealing with it, vs numerous beneficiaries some of which may have no idea how to deal with tac on inheritance.

It makes much more sense for the taxman to tax the estate rather than the beneficiaries. And by principle, income isn't supposed to be taxed twice.

It amounts to the same thing.. Every individual gets paid from the estate after tax has been deducted. Just in the same way that employees get paid their wages after tax has been deducted.

I have a friend who inherited a flat and rented it out. She had always had paye income and it has not occurred to her it should be treated as income until I told her. HMRC have something called the Let property campaign for people to declare undisclosed rental income. She declared it and paid tax and interest so all sorted but the fact that hmrc runs this campaign makes me think there is a lot of undisclosed rental income out there, whether it is deliberate or not.

But the end result is exactly the same either way - same amount of tax paid, same amount of money received. Why does it matter?

You’re being incredibly obtuse.

Like a pp said, you may as well be saying an employee doesn’t pay tax because tax is taken off their pay before they receive it.

The estate being taxed is just taking the tax at source (the same as PAYE) and so that thresholds, rates etc can be applied correctly. If the estate was taxed AND the beneficiaries were taxed on inheritance received then that would be taxing the same money twice.